Operational Auditing - Part 2

• NCJ Number: 70791
• Journal: Internal Auditor Volume: 28 Issue: 3 Dated: (May/June 1971) Pages: 37-55
• Author(s): J T Choi
• Date Published: 1971
• Length: 19 pages
• Publication Format: Article
• Language: English
• Country: United States of America
• Note: Operational Auditing - Part 1 appeared in the March/April issue of the Internal Auditor.

Annotation

The methodology of operational auditing is briefly summarized, and a survey of companies using operational audits is reported.

Abstract

The increased size of American industrial corporations has separated management from the operations of the organizations. Accounting systems thus have been devised to record, classify, and organize data relative to operations to be presented to management. Operational auditors can further ascertain the extent of compliance made with management's rules and policies and can constructively analyze the company's internal operations. The operational audit does this through familiarization with the department, verification of facts, evaluation of procedures (how do they meet department objectives?), reviewing audit findings with department heads and with facts, making recommendations, and compiling a final report that diplomatically, clearly, consistently, and concisely indicates areas for improvement in effectiveness and efficiency. Most important, operational audits must be directed to the evalaution of the adequacy and effectiveness of management controls to the ends of achieving management's objectives, rather than to the direct evaluation of the degree of technical ability or judgment in performing the operational functions. A survey showed that over 73 percent of the companies have a corporate level director of auditing, 83 percent are engaged in performing operational audits, and over 34 percent saw great cost savings to the company through recommendations from operational auditors. Internal auditors through the use of operational audit techniques have become an integral part of the management team. Internal auditors must continue to improve their knowledge and skills, particularly in management and in computer application. Successful operational auditors must continue to sell the process to their companies as a way for reducing costs and increasing profits. Tables illustrate the survey findings, and 71 footnotes are provided.